30 December 2011

Food Inflation Plunges To Six-Year Low of 0.42 Percent

Food inflation fell sharply to a six-year low of 0.42percent in the week ended December 17 as prices of essential items like vegetables, onion, potato and wheat declined.

Food inflation, as measured by Wholesale Price Index (WPI), stood at 1.81percent in the previous week. It was recorded at 15.48percent in the corresponding week of 2010.

According to official data released today, onions grew cheaper by 59.04percent year-on-year during the week under review, while potato prices were down by 33.76percent. Prices of wheat also fell by 3.30percent.
Overall, vegetables became 36.02percent cheaper during the week ended December 17.

Experts feel the sharp fall in food inflation numbers, which was in double digits till the first week of November, comes as a big relief to both the government and the Reserve Bank, who have been battling high prices for over two years.

It will also be a major incentive for the RBI to look at the option of key interest rate cuts at its next quarterly monetary policy review in January.

However, other food products grew more expensive on an annual basis, led by protein-based items.

Pulses became 14.07percent costlier during the week under review, while milk grew dearer by 11.30 per cent and eggs, meat and fish by 11.56percent.

Fruits also became 8.46percent more expensive on an annual basis, while cereal prices were up 2.15percent.

Inflation in the overall primary articles category stood at 2.70 percent during the week ended December 17, as against 3.78percent in the previous week. Primary articles have over 20 per cent weight in the wholesale price index.